29 th Annual LA GFOA Fall Conference October 4, 2012 Baton Rouge Crowne Plaza Presented by Tim Green, CPA Allen, Green & Williamson, LLP

 Must commute monthly from Mars?YesNo  Must consider GASB to be a sovereign nation in order to be able to issue such harsh regulations?YesNo  Cannot be from local government?YesNo  Never had to apply their own (GASB) rules?YesNo  Issues GASB standards only after extensive cost/benefit studies?YesNo  Are in cahoots with the actuaries?YesNo  Have too much wine before each meeting?YesNo  Must have been the substitute referee team for the recent Monday night NFL football game?YesNo Allen, Green & Williamson, LLP2

 Must idolize the anti-social John Nash (played by Russell Crowe), a real-life mathematician who descended into schizophrenia yet overcame his illness and went on to win a Nobel Prize, in the movie “A Beautiful Mind?“YesNo  Must be related to certain members of my governing board?YesNo  Should go to confession after some of the standards they have issued?Yes No  Must hold their monthly meeting at places like the Whiskey Smokehouse in BostonYesNo  Sole qualification to becoming a GASB board member is to be a registered voter?YesNo Allen, Green & Williamson, LLP3

 Bob Attmore (2014) - Former New York Deputy State Comptroller & State Auditor  Chair Jim Brown (2017) - Former partner at BKD LLP serving in the National Office Accounting and Auditing Quality Control Department  Bill Fish (2016) - Previously, he was the Chief Investment Officer of Chartis U.S., a property and casualty subsidiary of AIG, where he was responsible for managing $80 billion in assets.  Michael Granof (2015) - Dr. Granof is the Ernst & Young Distinguished Centennial Professor of the McCombs School of Business at the University of Texas at Austin Allen, Green & Williamson, LLP4

 David Sundstrom (2014) - Following Orange County’s bankruptcy in 1995, Mr. Sundstrom joined the county as its director of internal audit and helped lead the county’s recovery. He was then elected as the county auditor-controller in June  Jan Sylvis (2015) - Chief of accounts for the state of Tennessee since 1995, she serves as the state’s controller and manages its centralized accounting system.  Marcia Taylor (2017) - She is the assistant municipal manager of Mt. Lebanon, Pennsylvania. Allen, Green & Williamson, LLP5

 Members Represent: ◦ 2 State GovernmentsNew York & Tennessee ◦ 1 UserNew York ◦ 1 Independent Auditor Missouri ◦ 1 AcademiaTexas ◦ 2 Local Governments California & Pennsylvania Allen, Green & Williamson, LLP6

For Use of His Slide Presentation “GASB Update” (with some modifications by Tim Green) (Obviously slide 2 & 3 would not have been his slides) Allen, Green & Williamson, LLP7

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Statement 57, paragraph 8—Agent OPEB Plans Statement 60—Service Concession Arrangements Statement 61—Reporting Entity Statement 62—Codification of AICPA and FASB Statement 63—Deferrals Presentation Statement 64—Derivative Terminations Statement 65—Assets and Liabilities—Reclassification and Recognition Statement 66—Technical Corrections Statement 67—Pension Plans Statement 68—Pensions for Employers Allen, Green & Williamson, LLP9

 Meeting the needs of constituents is one of the GASB’s key goals. In support of this goal, the GASB makes a variety of resources available through its website, including up- to-date information about:  Current projects  Recent major pronouncements  Free copies of proposals and final pronouncements  Educational resources  Resources for users. Allen, Green & Williamson, LLP10

 2012 ◦ Statement 57, paragraph 8—Agent OPEB Plans ◦ Statement 60—Service Concession Arrangements ◦ Statement 62—Codification of AICPA and FASB ◦ Statement 63—Deferrals Presentation ◦ Statement 64—Derivative Terminations  2013 ◦ Statement 61—Reporting Entity ◦ Statement 65—Assets and Liabilities—Reclassification and Recognition ◦ Statement 66—Technical Corrections  2014 ◦ Statement 67—Pension Plans  2015 ◦ Statement 68—Pensions for Employers Allen, Green & Williamson, LLP11

OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans Allen, Green & Williamson, LLP13

 Paragraph 8 - If actuarially determined information about an agent employer’s individual OPEB plan also is included in aggregated information reported by the agent multiple- employer OPEB plan in conformity with Statement 43: ◦ a. The agent employer should obtain actuarial valuations of its individual-employer OPEB plan at least as frequently as is required for the agent multiple- employer OPEB plan in which it participates. ◦ b. The agent multiple-employer OPEB plan and each of its participating employers should obtain actuarial valuations as of the same actuarial valuation date. Allen, Green & Williamson, LLP14

Accounting and Financial Reporting for Service Concession Arrangements

 SCAs are a type of public-private or public-public partnership.  The term public-private partnership is used to refer to a variety of: ◦ Service arrangements ◦ Management arrangements ◦ SCAs Allen, Green & Williamson, LLP16

 The transferor conveys to the operator the right and related obligation to provide public services through the operation of a capital asset in exchange for significant consideration, such as an up-front payment, installment payments, a new facility, or improvements to an existing facility.  The operator collects and is compensated from fees from third parties Allen, Green & Williamson, LLP17

 The transferor determines or has the ability to modify or approve what services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services.  The transferor is entitled to significant residual interest in the service utility of the facility at the end of the arrangement Allen, Green & Williamson, LLP18

 If the facility is an existing facility, the transferor should continue to report the facility as a capital asset  If the facility is a new facility purchased or constructed by the operator, or an existing facility that has been improved by the operator, the transferor should report ◦ a. The new facility or the improvement as a capital asset as FMV when placed in operation ◦ b. Any contractual obligations as liabilities, and ◦ c. A corresponding deferred inflow of resources equal to the difference between (a) and (b) Allen, Green & Williamson, LLP19

 Paragraph 10. A transferor should recognize a liability for certain obligations to sacrifice financial resources under the terms of the arrangement. Liabilities associated with the SCA should be recorded at their present value if a contractual obligation is significant and meets either of the following criteria: ◦ A. The contractual obligation directly relates to the facility (for example, obligations for capital improvements, insurance, or maintenance on the facility). ◦ B. The contractual obligation relates to a commitment made by the transferor to maintain a minimum or specific level of service in connection with the operation of the facility (for example, providing a specific level of police and emergency services for the facility or providing a minimum level of maintenance to areas surrounding the facility). Allen, Green & Williamson, LLP20

The capital asset is subject to existing requirements for depreciation, impairment and disclosures. However, the capital asset should not be depreciated if the arrangement requires the operator to return the facility to the transferor in its original or an enhanced condition.

 The corresponding deferred inflow of resources should be reduced and revenue should be recognized in a systematic and rational manner over the term of the arrangement.  If a liability is recorded to reflect a contractual obligation to sacrifice financial resources, the liability should be reduced as the transferor’s obligation are satisfied.  As obligations are satisfied, a deferred inflow of resources should be reported and the related revenue should be recognized in a systematic and rational manner over the remaining term of the arrangement. Allen, Green & Williamson, LLP22

 Improvements made to the facility during the term of the SCA should be capitalized as they are made and also are subject to requirements for depreciation, impairment, and disclosures.  If an SCA requires up-front or installment payments from the operator, the transferor should report (a) the up-front payment or PV of installment payments as an asset, (b) any contractual obligations as liabilities, and ( c) related deferred inflow of resources equal to the difference between (a) and (b). This revenue should be recognized in a systematic and rational manner over the term of the engagement. A liability should be recognized if the transferor has contractual obligations that meet the criteria in paragraph 10. Allen, Green & Williamson, LLP23

 Intangible asset  Improvements to intangible assets ◦ Extend the useful life ◦ Increases the capacity of the facility ◦ Increases the efficiency of the facility  Amortizing intangible assets  Requirement to return a facility in a specified condition – prominent info Allen, Green & Williamson, LLP24

 Revenue sharing arrangements  Disclosures related to SCAs ◦ General description of the arrangement, including management’s objective, status of construction projects ◦ Nature & amount of assets, liabilities and deferred inflows of resources ◦ Nature & extent of rights retained by the transferor or granted to the governmental operator ◦ Describe any provisions for guarantees and commitments ◦ Above should be reported in the notes to the financial statements

Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements

 Conflict with or contradict GASB standards ◦ FASB Statement No. 4—Gain or loss on debt extinguishments ◦ FASB Statement No. 43—Compensated absences  Are not applicable to governments ◦ FASB Statement No. 84—Convertible debt  Rarely applicable (excluded) ◦ FASB Statement No. 19–Oil and Gas  Are applicable to governments ◦ FASB Statement No. 5—Contingencies ◦ FASB Statement No. 34—Capitalization of interest  Will be addressed in GASB projects (applicable, but excluded) ◦ APB Opinion 16—Business combinations Allen, Green & Williamson, LLP27

 Statement 20 is superseded ◦ All applicable pre-11/30/89 standards are contained in the GASB’s codification ◦ All potentially applicable post-11/30/89 non-GASB standards will be “other accounting literature”  Guidance on 29 topics is brought into the GASB literature Allen, Green & Williamson, LLP28

 Special and extraordinary items (APB Opinion 30)  Comparative financial statements ( Accounting Research Bulletin 43)  Related parties (FASB Statement 57)  Prior-period adjustments (FASB Statement 16 and APB Opinion 9)  Accounting changes and error corrections (APB Opinion 20 and FASB Interpretation 20)  Contingencies (FASB Statement 5 and FIN 14)  Extinguishments of debt (APB Opinion 26 and FASB Statement 76)  Inventory (Accounting Research Bulletin 43)  Leases (FASB Statements 13, 22, and 98 and FASB Interpretations 23, 26, and 27) Allen, Green & Williamson, LLP29

 Sales of real estate (FASB Statement 66)  Real estate projects (FASB Statement 67)  Research and development arrangements (FASB Statement 68)  Broadcasters (FASB Statement 63)  Cable television systems (FASB Statement 51)  Insurance enterprises (FASB Statement 60)  Lending activities (FASB Statement 91)  Mortgage banking activities (FASB Statement 65)  Regulated operations (FASB Statements 71, 90, and 101) Allen, Green & Williamson, LLP30

 What are the Issues? ◦ GASB Statement 20, paragraph 7 option ◦ Guidance for government combinations ◦ FASB/IASB lease project Allen, Green & Williamson, LLP31

Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position

 Concepts Statement 4 identifies 5 elements that make up a statement of financial position: ◦ Assets ◦ Liabilities – Deferred outflows of resources – Deferred inflows of resources – Net position This differs from the composition currently required by Statement 34, which requires the presentation of assets, liabilities, and net assets in a statement of financial position Allen, Green & Williamson, LLP33

 Deferred outflows of resources – A consumption of net assets by the government that is applicable to a future reporting period – Has a positive effect on net position, similar to assets  Deferred inflows of resources ◦ An acquisition of net assets by the government that is applicable to a future reporting period Allen, Green & Williamson, LLP34

Deferred outflows should be reported in a separate section following assets Similarly, deferred inflows should be reported in a separate section following liabilities Net Position components resemble net asset components under Statement 34, but include the effects of deferred outflows and deferred inflows ◦ Net investment in capital assets ◦ Restricted ◦ Unrestricted.  Governmental funds continue to report fund balance Allen, Green & Williamson, LLP35

Allen, Green & Williamson, LLP36 Statement of Net Position Primary Government GovernmentalBusiness-typeComponent Activities TotalUnits ASSETS Cash and cash equivalents $ 11,712,829 $ 10,516,820 $ 22,229,649 $ 303,935 Investments 29,250,291 64,575 29,314,866 7,428,952 Derivative instrument--rate swap 1,040, Receivables (net) 11,792,650 3,609,615 15,402,265 4,042,290 Internal balances 313,768 (313,768) - - Inventories 322, , ,823 83,697 Equity interest in MSA joint venture 2,303,256.. Capital assets: Land, improvements, and construction in progress 28,435,025 6,408,150 34,843, ,239 Other capital assets, net of depreciation 141,587, ,980, ,568,336 36,993,547 Total capital assets 170,022, ,388, ,411,511 37,744,786 Total assets $ 226,758,185 $ 171,392,667 $ 398,150,852 $ 49,603,660 DEFERRED OUTFLOWS Accumulated decrease in fair value of hedging derivatives $ - $ 127,520 $ - LIABILITIES Accounts payable and accrued expenses $ 7,538,543 $ 659,592 $ 8,198,135 $ 1,803,332 Advances from grantors 1,435, ,911 Forward contract - 127,520 - Long-term liabilities: Due within one year 9,236,000 4,426,286 13,662,286 1,426,639 Due in more than one year 83,302,378 74,482, ,784,651 27,106,151 Total liabilities 101,512,520 79,695, ,208,191 30,375,033 DEFERRED INFLOWS Accumulated increase in fair value of hedging derivatives $ 1,040,482 $ - $ 1,040,482 $ - Unamortized service concession arrangement payments - 4,467,536 - Total deferred inflows $ 1,040,482 $ 4,467,536 $ 5,508,018 $ - NET POSITION Net investment in capital assets $ 103,711,386 $ 79,088,574 $ 182,799,960 $ 15,906,392 Restricted for: Transportation and public works 10,655, Debt service 3,076,829 1,451,996 4,528,825 - Housing and community redevelopment 6,845, Other purposes 1,483, ,445 Unrestricted (deficit) (1,567,785) 6,816,410 5,248,625 2,829,790 Total net position$124,205,183$87,356,980$211,562,163$19,228,627

 Provide details of different types of deferred amounts if components of the total deferred amounts are obscured by aggregation on the face of the statements  If the amount reported for a component of net position is significantly affected by the difference between deferred inflows or outflows and their related assets or liabilities—provide an explanation in the notes Allen, Green & Williamson, LLP37

 Statement 53—Accounting and Financial Reporting for Derivative Instruments  Statement 60—Service Concession Arrangements Allen, Green & Williamson, LLP38

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The Financial Reporting Entity—Omnibus Allen, Green & Williamson, LLP40

 Determine whether the standards for defining and presenting the financial reporting entity in Statement 14, as amended: ◦ Include the organizations that should be included ◦ Exclude organizations that should not be included ◦ Display and disclose the financial data of component units in the most appropriate and useful manner ◦ Are consistent with the current conceptual framework Allen, Green & Williamson, LLP41

 The most significant effects of the amendments are to: ◦ Increase the emphasis on financial relationships  Raises the bar for inclusion ◦ Refocus and clarify the requirements to blend certain component units ◦ Improve the recognition of ownership interests  Joint ventures  Component units  Investments Allen, Green & Williamson, LLP42

 Statement 14 requires inclusion if Potential Component Unit is fiscally dependant. That is, Primary Government has authority over: ◦ Budget, or ◦ Setting taxes and charges, or ◦ Issuing debt  Statement 61 adds a requirement for a financial benefit or burden before inclusion is required. Allen, Green & Williamson, LLP43

 Statement 14 requires inclusion of a Potential Component Unit if exclusion would make reporting entity’s statements “misleading or incomplete”  Statement 61 eliminates “incomplete,” and emphasizes that the determination would normally be based on financial relationships ◦ Such as significant financial benefit to/burden on the Primary Government that is other than temporary Allen, Green & Williamson, LLP44

 Statement 14 requires blending if Primary Government and Component Unit have “substantively the same” governing body  Statement 61 expands that requirement to also include: ◦ A financial benefit/burden relationship, or ◦ Primary Government has “operational responsibility” for Component Unit  Primary Government’s personnel manage activities of Component Unit like a fund, program, or department of the primary government Allen, Green & Williamson, LLP45

 The blending criteria is broadened to include component units whose total debt outstanding is expected to be repaid entirely or almost entirely by revenues of the primary government  Even if the component unit provides services to constituents or other governments, rather than exclusively or almost exclusively to the primary government Allen, Green & Williamson, LLP46

 Clarifies that the funds of a blended Component Unit have the same characteristics, reporting alternatives, and limitations as those of the Primary Government ◦ Major fund reporting ◦ Could be combined with other funds for display Allen, Green & Williamson, LLP47

 Clarifies how to blend component units in a business-type activity (BTA) reporting model:  In the three basic statements: ◦ For a multiple column BTA  Additional column(s), as if funds of the Primary Government ◦ For a single column BTA  Consolidate Component Unit data into the single column  Present combining information in the notes  Additional column(s), with Primary Government total column Allen, Green & Williamson, LLP48

 Clarifies the types of relationships that should generally affect the major Component Unit determination: ◦ Primarily financial relationships  Significant transactions with the Primary Government  Significant financial benefit/burden relationship ◦ Could be based on the nature of services provided by Component Unit  Eliminates consideration of each Component Unit’s significance relative to other Component Units Allen, Green & Williamson, LLP49

 An asset should be recognized for an equity interest in: ◦ A joint venture ◦ A partnership ◦ An investment ◦ A component unit  If the component unit is blended, the equity interest is eliminated in the blending process  Minority interests would be classified in net assets as “Restricted, nonexpendable”  Recognition and Measurement is based on Joint Venture equity interest requirements in Statement 14 Allen, Green & Williamson, LLP50

 Clarifies that current disclosures require: ◦ Rationale for including each component unit ◦ Whether it is discretely presented, blended, or included as a fiduciary fund (Practical consideration: Can aggregate similar Component Units for disclosure)  No new disclosures Allen, Green & Williamson, LLP51

Items Previously Reported as Assets and Liabilities

 Grants received in advance of meeting timing requirement  Deferred amounts from refunding of debt (credits)  Proceeds from sales of future revenues  Deferred gain from sale-leaseback  “Regulatory” credits Allen, Green & Williamson, LLP53

 Grant paid in advance of meeting timing requirement  Deferred amounts from refunding of debt (debits)  Cost to acquire rights to future revenues (intra-entity)  Deferred loss from sale-leaseback Allen, Green & Williamson, LLP54

 Derived tax revenue received in advance  Premium revenues (risk pools)  Grants received in advance of meeting eligibility requirements (other than timing) Allen, Green & Williamson, LLP55

 Grants paid in advance of meeting eligibility requirements (other than timing)  Rights to future revenues acquired from outside the reporting entity Allen, Green & Williamson, LLP56

 Debt issuance costs (other than insurance)  Initial costs incurred by lessor in an operating lease  Acquisition costs for risk pools  Loan origination costs Allen, Green & Williamson, LLP57

 Loan origination fees  Commitment fees (after exercise or expiration) Allen, Green & Williamson, LLP58

Technical Corrections—2012

 Statement 62 with ◦ Statement 13—Leases ◦ Statement 48  Purchase of a loan or group of loans  Servicing fees related to mortgage loans  Statement 10 with ◦ Statement 54—Risk financing pools Allen, Green & Williamson, LLP60

Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25 Effective FYE June 30, 2014 Accounting and Financial Reporting for Pensions –an amendment of GASB Statement No. 27 Effective FYE June 30, 2015

 Scope limited to pensions provided through trusts that meet certain criteria  Revises recognition, measurement, disclosure requirements for all employers ◦ Liability Measured net of pension plan’s fiduciary net position Fully recognized in accrual-basis financial statements ◦ Changes in the liability  Some recognized as expense in the period of the change  Others recognized as deferred outflows/inflows of resources with expense recognized over defined future periods Allen, Green & Williamson, LLP62

 Defined benefit and defined contribution pensions provided through trusts that meet the following criteria: ◦ Employer/nonemployer contributions irrevocable ◦ Plan assets dedicated to providing pensions ◦ Plan assets legally protected from creditors  Excludes all OPEB  Applies to employers and nonemployer contributing entities that have a legal obligation to make contributions directly to a pension plan ◦ Special funding situations ◦ Other circumstances Allen, Green & Williamson, LLP63

 Liabilities to the pension plan (for example, payables to plan for contributions at year end)  Liabilities to employees for pensions ◦ “Net pension liability” (NPL)  Total pension liability (TPL), net of pension plan’s fiduciary net position  TPL = actuarial present value of projected benefit payments attributed to past periods  Fiduciary net position as measured by pension plan ◦ Single/agent employers recognize 100 percent of NPL ◦ Cost-sharing employers recognize proportionate shares of collective NPL Allen, Green & Williamson, LLP64

 Public Employee Retirement System  Teachers Retirement System  School Employee Retirement System  Law Enforcement Officers’ and Fire Fighters’ Retirement System  Public Safety Employees’ Retirement System Allen, Green & Williamson, LLP65

 Potentially three different dates to consider ◦ FYE, measurement date, actuarial valuation date  Measurement date (of NPL) ◦ As of date no earlier than end of prior fiscal year ◦ Both components (TPL/plan net position) as of the same date  Actuarial valuation date (of TPL) ◦ If not measurement date, as of date no more than 30 months (+1 day) prior to FYE ◦ Actuarial valuations at least every two years (more frequent valuations encouraged) Allen, Green & Williamson, LLP66

 Measurement date (NPL) no earlier than 12/31/2014 (prior fiscal year-end)  Actuarial valuation date (TPL) no earlier than 6/30/2012 (30 months + 1 day prior to fiscal year-end) Allen, Green & Williamson, LLP67

 | 1) Project Benefit Pymts |  |________|__________|____________|   2) Discount Future Pymts  Present Value of Future Payments  | -|-|-|- | -|-|-|-|- |  3) Attribute Retirement Years Cost to Service Periods (working years) Allen, Green & Williamson, LLP68 Present Value of Future Pymts

 Conceptual Framework—Recognition and Measurement (PV)  Economic Condition Reporting—Financial Projections (PV)  Government Combinations (ED)  Financial Guarantees—(ED)  Fair Value—Definition and Application  GAAP Hierarchy  Other Postemployment Benefits  Pension Implementation Guides Allen, Green & Williamson, LLP69

 What You Should Know about Your Local Government’s Finances—now available  What You Should Know about Your School District’s Finances—now available  An Analyst’s Guide to Government Financial Statements—now available  New guide on business-type activities coming soon Allen, Green & Williamson, LLP71

 Tim Green, CPA, Partner  Allen, Green & Williamson, LLP  2441 Tower Drive  Monroe, LA   Telephone: Allen, Green & Williamson, LLP72